Defauled Loan To HCE with a Rollover Account

[Guest merlin]

A participant (HCE) took a loan in 02. Loan was OK by plan terms. He defaulted in 03. In addition to his regular participant account balance he had a rollover account from a prior plan. The plan permits dstribution from the r/o at any time. There are no other in-service distribution provisions in the plan.The loan papers do not specify which account secures the loan. Rather than considering the defaulted loan as a deemed distribution, can I consider it an offset against the r/o? Is the defaulted loan a PT? If so, does the offset cure the PT?

[Belgarath]

I'll take a stab, but I think you're in one of those dreaded "gray areas" which will ultimately require the Plan Administrator to take a stand one way or the other on interpretation.

1. I would say that you can probably offset it against the rollover account, in the absence of document and/or loan papers that don't address it one way or the other.

2. I would say that it is not a P/T. As long as it satisfied the requirements as a bona fide loan when made, then I don't believe it is a P/T.

3. If 2 is correct, N/A.

[Guest merlin]

Isn't the "Gray Area" Gandalf's responsibility?

[Belgarath]

I certainly hope so. I remember reading a satire called "Bored of the Rings" which was really awful, but did have one humorous part - Gandalf became "Goodgulf." Of course, to many of the younger members of these boards, it wouldn't seem that funny because the Goodgulf advertisements were before their time. I'm starting to feel like the grandfather whose grandson asked him, "Grandpa, were you on Noah's Ark?" The grandfather replied, "Oh no, no, no - Noah's Ark was a very, very, VERY long time ago." The grandson then said, "Then Grandpa, how come you didn't drown?"

[Guest merlin]

Goodgulf? Yikes! What's next, Burma Shave?

[Guest jody303]

Belgarath, I thought you were 12,000 years old (at least according to Silk, who was teasing at the time)! So, wouldn't that place you well before Noah and the flood?

[Belgarath]

I think I'd better invoke my 5th Amendment rights here...